Motorola chip unit bought for $1.6 billion

CBS.MarketWatch.com

SCHAUMBURG, Ill. (CBS.MW) -- Motorola said Tuesday that privately held Texas Pacific Group is leading a management buyout of the electronics manufacturer's semiconductor components group in a deal worth $1.6 billion.

Motorola will receive the transaction amount in cash, notes and approximately 10 percent of the stock in the new company. The deal is expected to close in the second half of 1999.

The company said it expects the deal to have a "slightly negative impact" on sales. The company's semiconductor products unit had sales of $7.3 billion in 1998, and the semiconductor components group accounted for $1.5 billion of that total.

"This transaction is a reflection of (the semiconductor products unit's) leadership commitment in the embedded market by focusing on its core strength -- a market-based approach combined with powerful technology to provide system-level, integrated solutions for its customers," Christopher B. Galvin, chief executive officer of Motorola, said in a press release.

In addition, Steve Hanson, Motorola senior vice president and general manager of the semiconductor components group, will stay on in the role of president. The unit's 10,000-member staff will become employees of the new company.

Texas Pacific Group is located in Fort Worth, Texas, and is a private investment firm that specializes in acquisitions.

The company beat out an unsolicited offer by TFG Acquisition Group to buy the unit for the same dollar amount. TFG, whose bid was announced Monday, is a group led by present and former executives ofMotorola. See full story.

In related news, U.S. Bancorp Piper Jaffray analysts Samuel May and Thomas Sepenzis initiated coverage of Motorola with a "buy" rating and set a six-month price target of $105 a share.

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